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Smokers in Maine and Wisconsin were fuming yesterday as the two states boosted cigarette excise taxes more than 15 cents per pack.
Maine raised its cigarette excise tax 16 cents per pack from 74 cents to $1. Wisconsin increased its cigarette tax 18 cents to 77 cents per pack.
The cigarette tax in Maine is imposed at the distributor level. Retailers will be affected by the cost of cigarettes purchased after Oct. 1, and by a requirement to report all cigarettes in inventory at that time and remit the additional tax on their inventory, said Tony Neves, director of Maine Revenue Services, the state tax department.
Neves said the state stands to net an additional $15 million annually from the tax increase on prepared food and more than $30 million a year from the cigarette tax hike. That would rank the cigarette tax as the state's third largest source of revenue, behind the individual income and sales taxes.
Tax officials expect a certain number of "honest mistakes" as retailers get used to the new tax rates, Neves said, adding that he expects the public to help enforce the change.
The 30-percent tax hike in Wisconsin will be used to cover costs of prescription drugs for senior citizens. The tax could generate an additional $130 million over the next two years, lawmakers estimated.
The state pays millions of dollars in Medicaid payments for people who suffer health problems because of cigarettes, said Sen. Fred Risser (D-Madison). The tax should have been raised to a dollar a pack, he said.
The average price per pack of cigarettes in Wisconsin is about $4.
Maine additionally imposed a "meals tax," which applies to all food that any retailer prepares. The increase will affect "all forms of prepared food, from coffee or a steamed hot dog sold by a convenience store to a meal sold by a fast food chain," Neves said.
Tax officials note that the prepared food tax hike will impose multiple rates of tax in many retail establishments. "For instance, a convenience store selling prepared food will be faced with collecting 7 percent tax on food that they have prepared, such as coffee or steamed hot dogs, and 5 percent on taxable items such as soda, beer, and candy," according to Neves.